Maine has repealed its statute that requires registration and licensing of commercial co-ventures. Effective on October 8, 2013, co-venturers will no longer be required to obtain a license to conduct a commercial co-venture in Maine. That’s great news for companies that wish to add a charity component to promotions advertised in the state.

A commercial co-venture (also known as cause marketing) refers to a promotion in which a for-profit company advertises that a portion of its proceeds from the sale of one or more of its products will be donated to a charity. For example, a dog food manufacturer may advertise that $1 from each bag of dog food sold will be donated to a local animal shelter.

A majority of states currently have laws that regulate commercial co-ventures. These laws are designed to protect customers from deceptive or fraudulent promotions that make misleading promises about their contributions. The statutes generally require that the co-venturer and the charity enter into a written agreement; that certain financial records be prepared and maintained; and that all ads and other promotional materials include specific disclosures, such as the percent of sales or total dollar amount of money that will be donated to the charity.

Three of these states — Maine, Massachusetts, and Alabama — also require that the co-venturer register and obtain a license from the state. These regulations also require submission of a surety bond ($25,000 for Maine and Massachusetts and $10,000 for Alabama) and periodically filed reports on the sales and donations that have been made in accordance with the promise to the charity.

Many of us who handle these commercial co-venture registrations find them to be unnecessarily complex, burdensome, and, at times, somewhat frustrating. In one or more of the registration states, co-venturers must submit the company’s articles of incorporation; the names and addresses of officers and the board of directors; as well as copies of all advertisements and promotional materials that will be used in the program. These states also require the company to renew its license every year, submit detailed reports after the promotion ends or turn over annual reports concerning payments to the charity.

Commercial co-venture statutes are an important and necessary means of thwarting those who attempt to use commercial co-ventures to defraud customers and pocket funds that customers believe are going to a charity. However, over-regulating these promotions could make companies reluctant to participate in a commercial co-venture and reduce otherwise valuable donations that are crucial to charities. In this instance, I believe the State of Maine has made the right decision.

This post was written by retired Thompson Coburn partner Dale Joerling. If you have any questions about the topics discussed in this post, please contact Thompson Coburn partner Hap Burke.

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